Domestic brokerage Emkay Global downgraded its rating on lender Karnataka Bank following the top brass exiting their positions amid differences with the board of directors. The bank's CEO Srikrishnan Hari Hara Sarma and Executive Director Sekhar Rao stepped down from their positions, citing personal reasons.
On June 29, Karnataka Bank reported the development in an exchange filing. Srikrishnan Hari Hara Sarma's resignation will be effective from July 15, while Sekhar Rao will leave the bank on July 31.
Following this, Emkay Global cut its outlook on the bank's shares to 'add', from 'buy' earlier. Further, the brokerage also cut its target price by 15 percent to Rs 220 per share.
The brokerage cited Moneycontrol's exclusive report that the exits followed differences over a Rs 1.53 crore consultancy spend flagged by auditors in May 2025 which exceeded the directors’ delegated authority and was not ratified, making it recoverable from the directors.
The brokerage said that the management’s flip-flop view on growth and the relative underperformance compared to guidance too could have played a role in this friction with the Board. Additionally, the brokerage noted that a radical business approach in an otherwise traditional organization could have added to the discord.
"We believe this could be just another reason for the friction gradually building up between the new management and the Board," said the brokerage. Such leadership churns are not uncommon in regional PVBs post management overhauls, with mixed outcomes across peers; some successful (Karur Vysya Bank, RBL Bank, Federal Bank), and others less so (DCB Bank, Lakshmi Vilas Bank).
"We believe the management void would impact Karnataka Bank’s transformation process, including retailization and hence growth. Factoring this in, we trim earnings by 6-13 percent over FY26-28E," the brokerage added.
However, Emkay Global took comfort in Karnataka Bank’s in-expensive valuations, higher capital levels, and hopes of the Board hiring an external MD to help the bank maintain its transformational journey.
Follow our live blog to catch all the market updates
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
